After launching in the US last summer, Spotify has more than doubled its revenue to €187.8 million, but is spending nearly all of that. Paid Content reports that Spotify’s annual loss widened to €45.4 million in the 2011/2012 12 month period. Spotify’s challenge is to expand rapidly enough to cover expenses, while battling the high cost of streaming music laden with hefty licensing fees.
Unlike platforms like Pandora, iHeartradio and other streaming broadcasters and online only webcasters, Spotify is an on-demand platform that negotiates licenses directly with the labels. In fact, the major labels all have a stake in the company as part of those negotiations.
Spotify’s business model is different as well — subscriptions are a more important part of their revenue strategy. Spotify is spending lots of time and energy pursuing the widespread use of its API and third party app, and in fact hopes to become the world’s source for streaming music. When you think about the fact that the labels have a stake in this, it makes quite a bit of sense.
The main problem is that expansion is difficult, margins are slow, and losses are becoming hefty. Which could necessitate more funding. Which would in turn dilute the labels and prompt them to negotiate higher rates in future licensing deals. A merry-go-round of a business model…
An excellent discussion of best practices for broadcasters to stream their programming has arisen out of Saga’s announcement that they would stop inserting different commercials online and instead stream entire simulcasts of their over the air stations. The main reason they offered for doing that was that ad insertion technology does not sound good on the air – sound levels vary, stop set timing is often poor, and the spots that are inserted are often filler content like psa’s.
And all of that is true – stations that simply try to plug in ad insertion technology and let a series of psa’s and commercials cover their over the air stopsets do sound pretty bad. Unfortunately for small stations without budgets and staff to dedicate to the production of a good sounding online station, it takes more effort than that to produce a good sounding station.
But there is a big risk with simulcasting an over the air signal online, one which could really start to affect the perceived value of the product. I’m talking a
bout the ads. You know, those over the air ads that encourage the listener to call right now, or drive right in. Those ads are misfits on an online station. Do you think anyone that is listening to a station online is going to call an advertiser? Of course not. Online listeners are online and every commercial should have an online call to action. Ignoring that and using over the air commercials is simply ignoring the technology.
Radio’s big opportunity in online radio lies specifically in its ability to target and track ads. To compete with other media that have similar abilities. Sure, it’s not plug and play — every advertiser needs an ad with an online call to action and an on screen clickable display banner or link. Even better — support those ads with an advertiser directory on your website where listeners can get more information, print coupons, register for offers. Integrate your online offerings to increase the benefits to your advertisers.
A decision to simulcast your over the air programming is as good as a decision to stop streaming if you ask me. In fact, I might even say that if that’s your approach you might as well shut it off. No reason you can’t change your mind down the road..
This week Apple was awarded a patent that appears to be a shot across the bow to streaming broadcasters. The patent enables switching from broadcastor streamed content to media stored on a device. By using information available from RDS data, broadcast listings or published programming schedules, the device would determine in advance what programming might not be of interest to the user and then switch to songs or podcasts stored on the device or streamed from a cloud based library. The system reportedly uses the device owner’s content consumption habits, as well as “like” and”dislike” interactive features to determine preferences.
Apple Insider presents this description from published patent information:
“For example, a user may not like a particular song broadcast by a radio station, or may not like a particular segment of a talk radio station (e.g., the user does not like the topic or guest of the segment). As another example, a user may not be interested in content originally generated by sources other than the media source (e.g., advertisement content). Because the user has no control over the media broadcast, the user can typically only tune to a different media broadcast, or listen to or consume the broadcast content that is not of interest.”
There are a couple of remarkable things about this, not the least of which is that Apple is certainly a formidable competitor. The fact that they have developed this new technology which focuses extensively on replacing radio content is noteworthy. Implications could be significant for broadcasters and others that offer single stream programming, not to mention ad-insertion companies and advertisers. In fact, there could be, would be significant impact for on-demand services as well, since it would make an individual’s music library more useful and relevant.
And the devil is in the details, which might be comforting if the patent holder were any other than Apple…
The share of FM radio stations simulcasting online in Germany grew 2% last year to make up 13% of all online stations in that country. Most online stations in Germany – 82% – are pureplays, which are available only online.
According to Web Radio Monitor 2012, an updated study just released by Goldmedia, listening is up 36% over 2011. The study surveyed all online radio providers in Germany and found that online radio providers’ total net ad revenues grew to 14.1 million euros, a 37% increase over 2011. 45% of online stations sell ads, and their outlook on the future is positive, they’re forecasting a market of 30 million euros by 2016.
Not surprisingly, mobile devices are gaining importance in the German streaming marketplace, just as they are in the US. Three quarters of the respondents regard mobile online radio as their central method of broadcasting. In fact, 57% predicted that mobile online radio might be able to replace classical FM radio in the long run. Mobile streaming, via apps or mobile browsers, now makes up 17% of all hits, compared to 14% in 2011. By 2014, mobile devices are expected to make up a quarter (24%) of all online radio hits.
Professor Klaus Goldhammer, Managing Partner of Goldmedia, will present the findings of this study at the debut of RAIN Summit Europe in Berlin on October 5th. He joins a highly informed pan-European list of speakers for the event. For more info on the summit, click here.
After announcing that they were going to stop streaming their broadcast content in smaller markets earlier this summer, Saga Communications is now announcing that they will move to complete simulcasts of their over the air broadcasts – including commercials – on the streams of all their stations. In extensive coverage of this story this morning in Inside Radio, Saga EVP Warren Lada says that the size of the streaming audiences of his stations is too small to be sold separately.
“I was uncomfortable with it because I don’t believe we are doing a service to our advertisers when we tell them that they’re going to get meaningful results from a relatively miniscule audience on a station’s internet stream — that’s disingenuous and not good for the industry,” Lada says. “It’s time for the industry to man up and recognize that primarily most of our audience is on-air and we should just include the stream with it — it’s just part of what we do.”
Other folks disagree — Triton Digital COO Mike Agovino, Targetspot CEO Eyal Goldwerger and Katz360 President Brian Benedik pointed to the higher value of trackable, targeted impressions as good reasons not to abandon efforts to sell digital ads.
Another factor that likely contributed to Saga’s decision is Arbitron’s stance on measuring a station’s streaming stations – unless they are 100% simulcast of the broadcast they cannot be merged.
Saga has long been a skeptic of streaming, finding it difficult to justify the expense and measure the value of it. Like many small market broadcasters, they don’t have a lot of resources to dedicate to growing the online future of radio without seeing any revenue benefits. And what’s to stop them from reversing this position somewhere down the line? The reality is that simulcasts with inserted online ads, as Lada points out, don’t make for great listening. And building expanded online offerings that would attract more audience takes investment. So the question remains – is streaming an opportunity or an expense?
When my daughter, who is 17, wants to hear a song, she doesn’t turn to radio. Nor does she go to Spotify or Pandora. YouTube is her on-demand streaming service. A new study out from Nielsen says she is not alone. More teens listen to music on YouTube (64%) than radio (56%), iTunes (53%) and CD (50%).
Radio is still the primary machine for music discovery across all ages, but it looks like this study does not try to restrict the definition of “radio” to AM/FM.
The new Nielsen report offers insights on all aspects of music consumption including listening and purchasing behaviors; music discovery; live events; the use of social networking and mobile music apps; as well as how the economy is affecting music sales.
“The accessibility of music has seen tremendous expansion and diversification,” said David Bakula, SVP Client Development, Nielsen. “While younger listeners opt for technologically advanced methods , traditional methods of discovery like radio and word-of-mouth continue to be strong drivers. With so many ways to purchase, consume and discover great new music, it’s no wonder that the consumer continues to access and enjoy music in greater numbers.”
One of the takeaways of this study is that radio is a music discovery machine — curated programs and personalized streams work well for helping people find new music. But once they find it, they are inclined — especially teens – to turn to YouTube where they can WATCH it. When it comes to on-demand streaming, YouTube is (still) the elephant in the room…
BThis fall, on October 5th, a very smart group of people are getting together in Berlin, Germany to spend a day networking and discussing Internet radio. RAIN Summits, the very popular conferences for the Internet radio industry in the US and Canada, will debut RAIN Summit Europe this fall. If you are involved in Internet radio in Europe, or globally, this is an event you will want to attend.
The keynote speaker at the event is Jonathan Forster, General Manager of Spotify Europe. The most successful streaming service on the continent. Spotify launched in 2008 and has millions of users. About 25% of those users pay for a premium version of their service. Spotify originally launched in Sweden, and in that country their market share is unbelievable – one in every 3 people (37%) listen once a month! The service reaches 85% of 16 to 25 year olds and 55% of them listen daily!
In addition to hearing Forster, attendees to RAIN Summit Europe will meet and hear a long list of prestigious and smart speakers from across Europe discuss the business of Internet radio, from content to revenue. Agency executives from across Europe will debate online audio’s value proposition, sales experts will discuss monetization, and programming peeps will examine content trends. There will be dynamic discussions of online audio targeting and audience measurement. All taking place in a format that promises to enable lots of networking and idea sharing, similar to what takes place at RAIN Summit events here in the US.
I don’t have to tell you about the buzz that already surrounds Internet radio, if you’re reading Audio4cast you already get it. So contribute to the future of Internet radio by joining the conversation. If you are part of the online audio marketplace in Europe, don’t miss this chance to be part of the very first RAIN Summit Europe in Berlin on October 5th.
You can get more information about the event here. And save €20 when you register by entering the special code Audio4cast20 . See you there!
The Katz Online Network is growing, according to a newsletter sent out a few weeks ago to network affiliates and others. Sales and new advertisers are growing too, according to Scott Taylor, SVP at Katz360: “We are very happy with what we’re seeing for [the third] quarter. Retail stores are seeing dramatic growth, led by Savers, Walgreen’s, and Wal-mart. Lowe‘s leads our Home Improvement category, while RIngCentral headlines the Telecom category. New advertisers to Q3 already on the books include Allstate Insurance, ESPN, LearCapital.com, and Buffalo Wild Wings.”
In addition, according to Triton’s Webcast Metrics data, the Katz 360 Online Audio Network generated more than 380,000 Average Active Sessions per week (M-F 6a-8p) in May, up 66% from a year ago, with session starts more than doubled from a year ago.
In addition to emphasizing their expanding online audio network, Taylor points out that their display ad network, made up of the websites of their affiliate stations, delivers 50 million listeners. (Technically speaking, those listeners are not actually listening, the number represents the number of people visiting the websites of the radio stations.) It’s a big number, and it’s smart that Katz has moved in the direction of creating this customized network with comScore – no doubt it will enable them to better monetize that online inventory by gaining them notice and credibility with digital ad agencies.
A NY Times article yesterday provides a nice summary of the ongoing attempt of iHeartRadio to grow its reputation as an Internet radio portal and compete with TuneIn, an independant company that has been in the business of offering a universal directory with links to Internet radio streams, and making it easier to listen to Internet radio with apps and software directories for device and car manufacturers.
While iHeartRadio has 12 million registered users (that would be those who have ever registered to use the service once), TuneIn has 40 million monthly users. As a frame of reference, Pandora recently said they have 150 million registered users and 49 million used the service in the last 30 days – so roughly one-third of their registered user base are monthly listeners. That would put iHeartRadio’s monthly users at around 4 million.
The NY Times article provides a good, if oversimplified, summary of the two services, depicting them as similar in offerings and battling it out to be THE Internet radio aggregator. In fact, it would be better for services and listeners, if there were more than two aggregators offering access to every service out there, making it as easy as possible to listen. And stations, broadcasters and pureplays, should work with all of them. After all, easy access is supposed to be what the Internet is all about, isn’t it?